Correlation Between Origin Materials and NORFOLK

Can any of the company-specific risk be diversified away by investing in both Origin Materials and NORFOLK at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Origin Materials and NORFOLK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Origin Materials and NORFOLK SOUTHN P, you can compare the effects of market volatilities on Origin Materials and NORFOLK and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Origin Materials with a short position of NORFOLK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Materials and NORFOLK.

Diversification Opportunities for Origin Materials and NORFOLK

0.8

Correlation Coefficient

Origin Materials  NORFOLK

Very poor diversification

The 3 months correlation between Origin and NORFOLK is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P and Origin Materials is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Origin Materials are associated (or correlated) with NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of Origin Materials i.e., Origin Materials and NORFOLK go up and down completely randomly.

Pair Corralation between Origin Materials and NORFOLK

Given the investment horizon of 90 days Origin Materials is expected to generate 6.86 times more return on investment than NORFOLK. However, Origin Materials is 6.86 times more volatile than NORFOLK SOUTHN P. It trades about 0.04 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about -0.48 per unit of risk. If you would invest  115.00  in Origin Materials on October 11, 2024 and sell it today you would earn a total of  2.00  from holding Origin Materials or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	61.9%
Values	Daily Returns

Origin Materials  vs.  NORFOLK SOUTHN P

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for NORFOLK SOUTHN P investors.

Pair Trading with Origin Materials and NORFOLK

The main advantage of trading using opposite Origin Materials and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Materials position performs unexpectedly, NORFOLK can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NORFOLK will offset losses from the drop in NORFOLK's long position.

The idea behind Origin Materials and NORFOLK SOUTHN P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.